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Hollande says the euro is overvalued

Wednesday, August 20 15:19:52

French President Francois Hollande said again today that the euro is overvalued and, looking at the state of the French economy, many might agree with him.

France, the currency bloc's second-biggest economy after Germany, is afflicted by record-high jobless numbers, housing starts at a 16-year low and waning industrial output.

It has cut its growth target for this year and next and has acknowledged it will not meet its 2014 deficit target - a miss that Moody's says will be a credit negative for France and the whole euro zone.

No wonder Hollande wants an export-boosting weaker euro and more help from the European Central Bank in lifting growth.

ECB President Mario Draghi has also suggested the euro is over-valued, stressing after the bank's last policy meeting that the fundamentals for a weaker exchange rate were "much better" than a few months ago.

However, France arguably typifies other problems affecting the euro zone, which have already seen investors pull out of euro-denominated assets.

Hollande pledged on Wednesday to accelerate reforms to boost growth as fast as possible. He gave no details beyond saying the latest reform plan would tackle taxation, regulatory and financing issues for construction.

Other cost-cutting reforms have stalled.

The ECB's Draghi seemed a little pointed on Aug 7, in comments that might apply to France.

"We have to distinguish between countries that have done reforms and those that have done nothing or have done very little reforms," he said, referring to a lack of fiscal consolidation.

President Hollande thinks the euro is still overvalued.

Traders may see it as lese-majeste to disagree. (Reuters)

For more visit: www.businessworld.ie